The Downfall of a Bosnian Giant

This piece originally appeared on 18 February 2014 on the Al-Jazeera Balkans website.

During the 80s, the Krivaja timber and wood processing company from Zavidovići employed more than 12,000 workers and had representative offices in the USA, Germany, France and Algeria.

By: Dženan Kulović

When Cardinal Josip Bozanić uttered the phrase ‘the sin of structures,’ during the most recent creation of an independent Croatian state, he hit on the essence of social problems in the entire region. From then till today, that spoken phrase gives us one of the most succinct but also most effective diagnoses of the conditions confronting a society marked by scandals, destruction, crime and embezzlement.

The route from the self-managing socialism of the former Yugoslavia towards the market capitalism of today’s countries necessitated not only ownership transformation – that is a change in the structure of ownership – but also an individual transition in  ways of thought. All this began in the old state with Marković’s law [TN: the reference is to a number of laws in 1989-1990 under Ante Marković’s administration that began the process of privatization in the former Yugoslavia]. However, the unfortunate events in this region became an insurmountable obstacle to the implementation of the transition, which was halted with the beginning of the war.

Unlike in Slovenia, where the transition was carried out by ‘people of continuity’ [TN: politicians from the old system], by reformists like Milan Kučan and Janez Drnovšek, in other former Yugolsav countries a deeper and more radical transformation was carried out.

Annuling Privatizations

This is why today we have so many scandals that have resulted in the annulment of a growing number of privatizations in recent years (in Serbia more than 600 privatizations were annulled, while in Croatia the number is over 2,000).

In Bosnia, not a single privatization has been voided, although the consequences of so many failed privatizations are evident: tens of thousands of workers without work, nearly 700,000 years of unpaid seniority benefits, factory halls empty and machines laying idle. The consequences of all this are strikes by workers, road blockades, emigration and a range of other ways of expressing discontent. The review of these privatizations must become a priority for any future government if it expects consensus around the difficult reforms that await us.

The results of government [policy] to date can be seen in obvious examples on the streets. Former Croatian Presient Stjepan Mesić situates the causes of the most recent protests in the “plunder and robbery-style murder of the economy in Bosnia and Herzegovina,” stemming from the poorly conducted privatization process.

That a ‘sin of structures’ was truly committed can be seen through the example of Krivaja from Zavidovići. The statement by then Federal Prime Minister Nedžad Branković that the “model of Krivaja’s privatization can serve as an example for resolving the problems in Agrokomerc and in other enterprises in the Federation of Bosnia and Herzegovina” has been flipped on its head.

This former giant of Zavidovići’s industry, from which the city and region drew their livelihoods, now represents one of the darkest examples of privatization. All governing structures, continuously and without exception, have committed sins towards this strategically important enterprise.

Looking at its past, we can witness that this was once a globally respectable enterprise that was continuously in operation – from its establishment in the Austro-Hungarian era till its bankruptcy in the postwar period. During the 1980s, Krivaja employed more than 12,000 workers and had representative offices in the USA, Germany, France and Algeria. It even had its own commercial, transportation and hospitality lines.

While administrations and governments changed, this industrial giant continued to march in step with the demands of the times and survived. It even continued operations during the most recent war. It was never bombed, while its workers continued working even under the gaze of snipers. In contrast, if we look at the present, we would see that the politically guided practice of privatization has significantly contributed to the tycoon-ization and devastation of this enterprise, the city, region and economic sector.

What was once a source of well-being, has today become a source of problems. In addition to all this, the relationship between the ruling oligarchy and organized crime has created a feeling among the public that the two are cut from the same cloth. While in other countries, now beginning to stand firmly on their own two feet, the state is confronting such groups; here these groups have managed to fasten their ranks to the top [of state], and take full advantage of this relationship.

The devastating results

The longterm consequences of Krivaja’s privatization have been economically and morally devastating for its workers and for society.

The company repeatedly came into the wrong hands. Krivaja’s owners on several occasions announced the termination of the privatization contract for different reasons, including everything from on-going judicial proceedings to undelivered raw materials.

The attempt to sell the enterprise by tender in 2005 was proclaimed unsuccessful, after which Krivaja was bought through a direct agreement by Zavidovići-based Firmpex.

The privatization of this company has evoked among workers and trade-unions intense fears of capitalism, while creating hope among thieves and careerists that their ‘five minutes’ have come and that they should quickly take advantage of them.

The company was valued at €160-million, but was sold for €2.5-million via a direct agreement. However, the buyers didn’t respect the conditions of the agreement, failing to even register the company.

Empty promises were made about planned production worth €40-million, exports to other markets (including the US), and partnerships with the Swedish giant IKEA.

As a result, the property of the firm (the value of capital in Krivaja today is €0) melted away, along with the moral fabric of society (in Zavidovići today the unemployment rate is 50%).

Those who would point out the injustices taking place in the company were dismissed and held at arms-length from the enterprise. The 160 workers who were illegally fired sought remedy through legally binding rulings from the federal government, to which they marched on foot.

Privatization encompasses not only the economic but also the social aspects of the state. If everyone talks about corruption, while the government undertakes only what political interest dictates – if everyone is aware that every level of bureaucracy has its ‘fingers in the jar’ – it is prone to lobby and advocate for projects that will earn its representatives political points and personal benefits.

In spite of the announcement by Federal Prime Minister Nermin Nikšić that the “Government is with Krivaja’s workers” and that it is “ready to accept the role of a mediator in negotiations with the bankruptcy administrator, the company management and the trade union,” the workers haven’t hidden their disappointment.

The total lack of any real solutions for Krivaja is illustrated by the fact that two years’ ago the Prime Minister claimed that it was impossible to solve Krivaja’s problems piecemeal, only for Krivaja’s property to now go up for sale in seven separate lots. It appears that all attempts in the field to revive the ‘dying patient’ are futile.

Definitely Dying

The Krivaja case, as a result of all the manifestations that have accompanied it (including worker strikes due to unpaid wages for the timely and quality work they did, the plunder of offices abroad and stuffing the money in individual pockets, court cases launched by those who don’t expect to return to the firm), after all the enterprise’s units are locked-up, might end with its definite death (not only of this Zavidovići giant, but of all those who for years lived from Krivaja by offering their services).

Anyone who believes that this devastation can be prevented through one-off monetary payouts for workers, drawn form the federal budget, is a victim of delusion and ignorance. It’s simply a matter of which government will be brave enough to eventually make it official and tell the truth. We’re talking about an enterprise that has for years been evincing chronic difficulties and whose competitiveness has been lagging. These difficulties stem from its accumulated losses, which are the result of manifestations following such a condition.

If Krivaja is of strategic importance to the state, that is the Federation of Bosnia and Herzegovina, it needs to set aside €25-million in fresh funds for its rehabilitation. Yet, the state doesn’t have these millions and everything it does in the coming period in attempting to save Bosnia and Herzegovina’s most important wood-processing firm will appear like little more than simply poking about. Even if a miracle happens and funds are secured to settle all its debts, the first day after the enterprise would continue to record losses, since it has no clear strategy for escaping the crises.

We should ask – when Prime Minister Nikšić stated that “even today there are people who believe that Krivaja won’t succeed” and that “among workers there is still a group of people who think that you can receive a salary without doing anything” – who was he talking about? Are those people still around today? It’s clear that they are seeking answers from the prime minister by appearing in front of the Government’s building, which they only got to after they set off hungry and determined to march there two years ago.

In spite of everything, we’re aware that privatization is a very complex process, since by stimulating certain stakeholders it automatically discourages others. If we patronize the owners, we endanger the workers. You can judge for yourselves who the winners and who the losers of the past 20 years of privatization are.

The positions expressed in this text are those of its author and do not reflect the editorial policy of Al-Jazeera.

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